01 Feb Does the end of Tech Nation mark a new era for the UK tech sector?
Following this week’s announcement which saw core grant funding from the UK government awarded to a programme run by Barclays Bank instead of Tech Nation, David Cameron’s quango will now cease operations in March of 2023. CEO of business advisory and tech M&A expert, Claire Trachet, provides critical insight which looks at the impact that the abrupt shut down of the industry body will have on the wider UK tech ecosystem.
Tech Nation was initially launched in 2011 with the objective of helping UK startups secure investment and attract top talent into the sector. The organisation has helped 5000 technology companies accelerate growth, including many of Britain’s most successful tech companies, from Monzo and Deliveroo, to Skyscanner and Darktrace. The loss of their vital contract to Barclays now means the company will be forced to shut down operations at the end of next month, and with it, crucial support for thousands of startups and scaleups.
The news comes two weeks after business secretary, Grant Shapps, reaffirmed the current government’s resolve of improving startup prospects in the UK and reassuring investors of the sector’s resilience. The following week, chancellor Jeremy Hunt set out the government’s long term vision which will see the UK create “World-beating enterprises to make Britain the world’s next Silicon Valley”, identifying major opportunities within tech which he referred to as ‘the growth sector that will define the century’.
Despite this, the sector has recently experienced a string of announcements which suggest further support is required in order to strengthen “Scale-up Britain”, including the recent downfall of Britishvolt. The UK’s first gigafactory struggled to reach its ambitious commitments, however, founder and ex-CEO, Orral Nadjari, publicly stated the company could have been saved had the government given it only a third of the £100 million ($124 million) pledged by former Prime Minister Boris Johnson and the Automotive Transformation Fund.
“As funding under favourable terms has become increasingly inaccessible for tech scale-ups, investors begin to prioritise profitability over growth”, says Claire Trachet. Government support is crucial for the recovery of the sector following steep valuation drops last year, cautioning investors and damaging growth.
A key takeaway for the future of tech scale-ups in all of this is simple, yet, unpredictable – worst-case scenario planning. Experience is crucial in planning for every possible situation that could arise – not having any contingency plans leaves highly innovative startups like this in a vulnerable position. Tech Nation and Britishvolt – alongside thousands of other companies – may not have envisaged an economic outlook subject to such high inflation. Dealing with such vast quantities of investment capital means a sudden rise in interest rates makes it nearly impossible to adjust on the go.
Claire Trachet (CEO/Founder) comments on the collapse of Tech Nation and the future of scaleups and their funding:
“The decision to fund Barclay’s Digital Eagles over Tech Nation comes as a big blow for the sector, even though it was not a government organisation, its existence relied on government support. Although the Digital Eagle Labs serve a similar purpose, Tech Nation represented a new era for tech, away from institutional finance which many of these startups can’t rely on. As a crucial player in providing British tech startups with the guidance necessary to successfully scale, it is important to ensure new programs with a similar impact come to the fore.
“As the economy attempts to recover from inflationary pressures and high interest rates, the need for the UK to attract global investment to its tech sector should remain a priority. It’s important for founders and executives in the tech sector to adapt to the new funding environment, what their goals are and how they will achieve them. It’s very easy to get swept up in receiving funding and wanting to increase headcounts – this won’t cut it anymore. Focusing on profitability and product over growth should be at the forefront of every founder’s agenda in 2023 in order to secure their next round or a favorable exit.”
